(Yicai Global) Nov. 1 -- The hi-tech hub of Shenzhen in China’s southern Guangdong province will serve as a pioneer in the nationwide reform of the taxation system, the Ministry of Finance said yesterday.
Shenzhen will set up a modern financial and taxation system that will be a demonstration area adapted to socialism with Chinese characteristics, the ministry said, citing a document also released yesterday. Once tested, the reforms will then be rolled out to other cities.
Shenzhen is spearheading the reform of the taxation system due to the fast development of its economy and society, the high management level and strong tax collection ability, Shi Zhengwen, director at China University of Political Science and Law's Center for Research in Fiscal and Tax Law, told Yicai Global. The reforms will advance development in the Guangdong-Hong Kong-Macao Greater Bay Area.
"A tax on real estate might be tried out in Shenzhen even though this is not feasible in the current environment," Shi said. "Consumption tax reform is also likely, with certain consumption taxes to be collected at a later stage, such as at the consumption stage rather than at the current production stage. Such a move could help the local government increase its tax revenue."
Which taxes will be targeted in the reform is not specified in the document, said Lin Jiang, professor at the department of economics at Sun Yat-sen University’s Lingnan College. A real estate tax, closely watched by apartment owners, cannot be ruled out.
The ministry will also support the Shenzhen administration to raise the debt ceiling in order to focus on stabilizing local investments, the document said. The municipality will be encouraged to issue offshore Chinese yuan-denominated local government bonds and promote connectivity between the Greater Bay Area's financial markets.
Issuing offshore yuan bonds will help Shenzhen's economic development and serve as a lesson for future such moves by other local governments, Lin said.
The city will also address the housing problems facing non-permanent residents, Shi said. The central government said in the document that it will provide financial support for the renovation of affordable housing, public rental housing and old residential areas in Shenzhen.
Editors: Tang Shihua, Kim Taylor